5 Step Value-Chain Analysis for Customers’ Strategic Needs Essay Example
Value-chain analysis is used for many purposes, but the process of examining customers’ value chains is relatively new. In our five-step process, Step 1 explains how internal and external value chains can be used separately and in related ways. Step 2 shows how to construct a customer’s value chain. Step 3 shows how to identify the customer’s business strategy by examining this value chain and using other kinds of information. Step 4 explains how to use additional information and intelligence to leverage that understanding into strategic needs and priorities. Finally, Step 5 explains how a firm’s marketing function can best use this method of value-chain analysis as a new strategic capability.
Step 1: An overview of value-chain analysis
Value chains may be defined in two ways: (1) within a company they describe the various value-added stages from purchasing materials to distributing, selling, and servicing the final product (Porter’s 1985 concept),[3] and (2) they also delineate the value-added stages from raw material to end-user as a product is manufactured and distributed, with each stage representing an industry.[4] For convenience, we will refer to these two definitions as
‘‘internal’’ and ‘‘external’’ value chains, respectively.
The internal value chain is a key concept in the field of strategic management that has been thoroughly explored. In contrast, the external value chain has not been studied as extensively. The external value chain consists of the important upstream/supply and downstream/distribution processes. However, even though these processes occur outside the corporation, the strategic opportunities they reveal and areas of risk they highlight warrant careful study. Consider:
Outsourcing – involves transferring certain primary or support functions in the internal value chain to the external value chain.
B Vertical integration – involves taking control of one or more additional stages of the external value chain and
Step 1: An overview of value-chain analysis
Value chains may be defined in two ways: (1) within a company they describe the various value-added stages from purchasing materials to distributing, selling, and servicing the final product (Porter’s 1985 concept),[3] and (2) they also delineate the value-added stages from raw material to end-user as a product is manufactured and distributed, with each stage representing an industry.[4] For convenience, we will refer to these two definitions as
‘‘internal’’ and ‘‘external’’ value chains, respectively.
The internal value chain is a key concept in the field of strategic management that has been thoroughly explored. In contrast, the external value chain has not been studied as extensively. The external value chain consists of the important upstream/supply and downstream/distribution processes. However, even though these processes occur outside the corporation, the strategic opportunities they reveal and areas of risk they highlight warrant careful study. Consider:
Outsourcing – involves transferring certain primary or support functions in the internal value chain to the external value chain.
B Vertical integration – involves taking control of one or more additional stages of the external value chain and